CRA Claims Significant Flaws in Legislation to Dissolve RDAs

Sen. Alex Padilla (D-Los Angeles) has introduced legislation that could give California's redevelopment agencies if not a reprieve then at least a stay of execution. Senate Bill 659 would push the dissolution date from Feb. 1 to April 15 in order to allow cities and agencies time to put their affairs in order -- and, presumably, to allow the Legislature to deliberate on a replacement for redevelopment before the agencies are dismantled and their employees laid off. Despite fervent support from the California Redevelopment Association and many cities and advocacy groups, the success of SB 659 is far from assured.

A recent report broadcast by the CRA indicates that SB 659 will not move forward unless it addresses a host of logistical problems that have been identified in AB 1x 26, the budget bill that authorized the dissolution of redevelopment. The CRA contends that AB 1x 26 and the dissolution process that is prescribes will lead to litigation, bond defaults, and other complications stemming from the liquidation of redevelopment agencies' assets.

CRA and its members have identified the following areas of concern:

-Many redevelopment agencies have outstanding contracts for design work on infrastructure projects, but the projects themselves have not yet been funded. Therefore, successor agencies would have to pay the design firms for designs that will, presumably, never be implemented.

-AB 1x 26 fails to respect the schedule by which property tax revenues are collected, in December and April. The Supreme Court's decision, however, calls for successor agencies to be funded May 16, meaning that, according to CRA's analysis, there may be no funds with which to honor outstanding debts. This discrepancy could lead to defaults and insurance policy claims on many payments that are due prior to May 16.

-Many bond payments are not paid off in equal, regular payments throughout the year. Section 34183(a)(2) of AB 1x 26, however, calls for equal semiannual payments. This could result in a mismatch between the funds in successor agencies' coffers and the monies that are owed to serve RDAs' debt.

-AB 1x 26 calls for former tax increments to be pooled in Redevelopment Property Tax Trust Funds, with one trust fund for each county. CRA contends that this pooling does not respect the distinct project areas, including affordable housing, that rely on different types of financing and typically draw from funding pools that are kept separate from each other.

-The disposal of assets that are funded by tax-exempt bonds could run afoul of federal tax law.

-Agencies that received loans from their parent jurisdictions, in lieu of issuing more costly bonds, owe money to those jurisdictions that may not be covered under AB 1x 26's definition of "enforceable obligations."

-Many redevelopment agencies are members of joint powers authorities and may be party to bonds that have been issued by JPAs. AB 1x 26 does not specify how successor agencies are supposed to approach these bond obligations.

-Many agencies include employment contracts that require 120-day advance notice of termination. Successor agencies may not have funds to pay employees for this period.

CRA has identified other problems with AB 1x 26. Among the concerns are administrative costs, legal status of successor agencies, ability of RDAs to transfer properties, and the status of redevelopment plans and land us controls.